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The Weekly Rap! Friday March 7th, 2014

Don’t forget to “Spring Forward” and set your clocks back 1 hour Saturday night. This is the part of daylight savings time I have a love/hate relationship with. I love that is stays lighter later, but I hate that I have to lose an hour to get it.

The National Debt is currently: $17,425,075,475,245.00 is higher by about 43 BILLION. That’s 134 Billion increase in just 2 weeks. I post this so we will be aware of what we are leaving the next generation.

The Dow last traded at 16,425 about 100 pts higher than where it was last Friday. The S&P 500 is trading at 1,873. Gold is trading at $1,338 an ounce, while oil futures at $102.79 a barrel. Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.52/Gal.

The FNMA 30-year fixed 4.0% coupon, containing 4.25% – 4.625% mortgages, pretty much the benchmark or how rate sheets are priced these days is currently trading at 104.12 about .65 worse than where we were last Friday at this time. Basically each percent change in the price of the security translates to the price (or points paid or credited) of the mortgage rate. The higher the number (price), the better the rate.

In economic news this week; the big news of the week was that the U.S. generated 175,000 jobs in February and the unemployment rate edged up to 6.7%. The reader’s digest version is economic growth is just limping along, that is not really growing and not really falling.

Have you ever noticed that we are creatures of habit? We basically believe that any trend we are in will continue on. We for some reason cannot see that the trend will eventually change, that winter will become spring, that the stock market will not continue to go up (anyone remember the late 1990’s?) or that real estate values do not go up forever in a straight line. Eventually we will come out of the stagnant growth phase we are in. What it will take, I don’t really know, but when we get excited about just 175 new jobs growth something tells me we are stuck in a trend.

Consumers boosted spending in January, but most of the increase went to pay for medical care and higher utility bills during an unusually cold winter. The advent of the Affordable Care Act, commonly known as Obamacare, triggered a flush of spending in the first month after the law took effect. Health-care spending jumped 1.6% in January.

On a positive note: The final reading of U.S. purchasing managers’ index accelerated to 57.1 in February. The index was well above the 53.7 reading in January. Readings over 50 indicate growth. The final reading for February was the highest level in almost four years. The report shows that output and new business picked up sharply. Volumes of new work increased at the sharpest rate since April 2010.

The productivity of U.S. workers and businesses slowed sharply in the final three months of 2013, according to newly revised government figures.

Productivity rose a revised 1.8% from October through December, down from an original estimate of 3.2%. By contrast, productivity rose 3.5% in the third quarter. Productivity is a good barometer of a nation’s well-being. Companies earn higher profits when productivity rises and they can afford to pay more to workers, especially if they need to hire to keep up with demand. The wealthiest countries have the most productive workers. Yet productivity has risen slowly over the past few years in the aftermath of the Great Recession and there’s little evidence that it’s about to sharply increase.

In the Fed’s “Beige Book” report, economic conditions in January and early February were difficult to discern due to severe cold temperatures and a series of storms that left much of the country trapped under snow and ice. In sector after sector and region after region, the weather played havoc on conditions, the report said. There were 119 separate mentions of the word “weather” in the Beige Book. Fed Chairwoman Janet Yellen said it might be “months” before the Fed gets a good reading of economic conditions. The Beige Book is a collection of anecdotes on the economy used to help the Federal Reserve prepare for its next interest rate setting meeting.

The net worth of American households grew last year by $9.8 trillion, or 14%, according to the Federal Reserve. That includes a nearly $3 trillion jump in the fourth quarter alone. Most of the gains in net worth, $5.6 trillion, came through the stock market, as the S&P 500 climbed nearly 30%, and $2.3 trillion came in the value of real estate as home prices rose.

On the Real Estate front: Home prices according to CoreLogic, including distressed sales, increased by 12.0 percent in January 2014 compared to December 2013. January marks the 23nd consecutive month of year-over-year home price gains. Excluding distressed sales, home prices were up 9.8 percent year over year in January 2014. Despite gains in December, home prices nationwide remain 17.3 percent below their peak, which was set in April 2006. Including distressed sales, five states registering the largest year-over-year home price appreciation in January and California was in the group at +20.3% (16% excluding distressed sales. The CoreLogic Pending HPI is an exclusive metric that provides the most current indication of trends in home prices. It is based on Multiple Listing Service (MLS) data that measure price changes for the most recent month.

On the Employment front: The U.S. generated 175,000 jobs in February despite harsh winter weather, suggesting the economy has not slowed as much as a recent spate of indicators appear to show. The unemployment rate, meanwhile, edged up to 6.7% from 6.6% to mark the first increase in 14 months. Yet the rate rose because more people entered the labor force in search of jobs, which is usually a sign that they think more work is available. The better-than-expected headline number on jobs paves the way for the Federal Reserve to continue to withdraw stimulus from the economy.

The real truth is that even at 175,000 jobs growth is more of a break-even number. We need to see double or triple this number to see real economic growth. So be careful what you get excited about. The pace of hiring is a lot softer compared to last fall. The economy has added an average of 131,000 jobs in the past three months, compared to an average of 225,000 from September through November. And the number of people who have been out of work at least six months rose by the largest amount in almost two years. It may take another month or two to get a better read on the economy’s health because of unusually cold and snowy weather in the early part of 2014.

The number of people who applied last week for unemployment benefits fell to the lowest level since the end of November, but the level of initial claims appears to have been distorted by harsh winter weather.